Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Trump tariff tumult further exacerbates concerns over rising inflation
Radishes are piled up at a supermarket in Seoul, April 2. Yonhap
By Yi Whan-woo
Korea is facing steeper upward pressure on the prices of goods and services as U.S. President Donald Trump’s tariff war further fuels global inflation, according to economists on Tuesday.
The concerns over consumer prices here came as agricultural, livestock and fisheries products, as well as processed foods, have been driving up the overall inflation rate to over 2 percent for a third straight month through March.
Market observers suggest expanding imports of consumer goods, arguing that an increase in supply can help lower their prices and eventually bring down the overall inflation rate below 2 percent as it was in the last four months of 2024.
But whether such an import strategy can be effective is questionable, as Trump’s tariff hikes against its major trading partners last week are expected to hike the prices of goods worldwide.
“A looming global inflation means higher prices of imported goods in Korea,” Hanyang University economics professor Ha Joon-kyung said, adding, “A more carefully crafted import strategy is required as we face a turbulent trade environment.”
Ha noted that Trump’s tariffs are prompting several targeted countries to impose retaliatory tariffs against the U.S. and, therefore, “adversely affect prices of goods one way or another in the closely connected international trade network.”
The professor cited a Korea Institute for International Economic Policy report, which predicted that if the U.S. imposes tariffs on trade partners and those countries retaliate, U.S. inflation could rise by up to 10.4 percent.
He also cited a Korea Development Institute's report, which assumed that for every 1 percent increase in the global producer price index, Korea’s consumer price index is expected to rise by 0.23 percent in the short term and 0.32 percent in the long term.
Under the circumstances, Ha pointed out that the U.S. and China are Korea’s two largest sources of imports and that they jointly accounted for 33.5 percent of Korea’s entire imports in 2024.
The imports from China include agricultural and fisheries products, which saw a sharp year-on-year price hike in Korea’s inflation in March.
For instance, the price shot up 86.4 percent for radish, 49.7 percent for napa cabbage and 26.9 percent for onion. For fisheries, the price surged 4.9 percent to mark the steepest year-on-year increase since August 2023, when it hit 6 percent.
With regard to imports from the U.S., the price of livestock products went up 3.1 percent last month from a year ago.
Concerning processed foods, last month’s price rose 3.6 percent — the highest increase since 4.2 percent in December 2023. Processed foods especially were responsible for a 0.3 percentage point increase in overall inflation in March.
Shin Se-don, a professor emeritus of economics at Sookmyung Women's University, also said a persistently weak won against the U.S. dollar further raises doubt on the import strategy.
The value of the Korean currency remains below the psychological threshold of 1,400 won per dollar, raising speculation that such an exchange rate is becoming the new normal.
“The won’s depreciation means importers buy goods at higher prices than before, and under the circumstances, importing more goods may only worsen domestic inflation,” the professor said.
Shin assessed support for domestic producers “is urgently needed to tackle inflation” in the wake of wildfires that devastated many farms in southeastern Korea.
The fires destroyed areas larger than 67,000 football fields, according to the government. These areas include farms for garlic, mushrooms and other regional specialties that will take years to regenerate in the aftermath of the disaster.
“A failure to help producers in the region takes a toll on the supply of fresh produce,” he said.